Merging Established Equine Practices

The benefits of merging established equine veterinary practices include, but are not limited to, shared emergency coverage, cost economies of scale (labor, equipment, drugs, supplies and facility expenses), offering complementary services, and professional interaction, such as case and practice management discussions.

The first steps in merging are identifying a potential prospect and finding a mentor. The mentor should be someone who has successfully merged practices similar to those you are contemplating joining. The major issues in identifying a potential prospect for merging are compatibility and resulting practice area. Compatibility issues would include: each of the involved parties motives for merging; practice philosophies and styles; medical/professional and financial ethics; and the degree to which the practices offer complementary services. If the resultant practice is predominantly ambulatory, another issue is the workability of the final practice area.

Once a potential prospect is identified and you have found a mentor, the next step is meeting with the owner of the practice in which you are interested. The initial discussions should involve those items listed above, the most important of which are the make or break issues. The make or break issues include the two parties' motives for merging; practice philosophies; and medical, professional and financial ethics. Motives do not need to be the same but cannot be mutually exclusive. Philosophical and ethical issues are usually ingrained in one's personality and are not likely to change and should, therefore, be compatible. Financial discussions, with a complete open book policy, should also include the financial health of the involved practices and whether or not the responsible parties are willing to make the necessary changes for any financial weaknesses that may exist. Management issues and the size of the resultant practice should come later in the discussions, as these are alterable.

After the initial discussions have occurred, and the decision to attempt a merger is made, there are many issues still to be decided. The legal structure of the new entity is critical because not only the final structure but the way it is formed can have major tax implications. Both a tax attorney and a tax accountant should be consulted on this issue. Make sure you ask these professionals about all of the options available to you and your new partner, and don't be afraid to get multiple opinions before making a decision.

A major question to be addressed is: " Will the legal entity be formed immediately, or will some sort of trial period of working together initiate the relationship?" Many different formats for the initial relationship are tenable. Working in a parallel fashion, where office space, equipment and other resources are shared but finances and clients remain separate, is one option. Another option is the smaller practice becomes employed by the larger practice. In this second option, all employees of the smaller practice that will be retained in the new practice become employed by the larger of the two practices. If an employment situation will be created by the new entity, all employment issues, whether they involve veterinarians or staff, will need to be worked out prior to forming the new group practice. Employment issues include but are not limited to: salary, benefits, insurance, vacation and management responsibilities.

An exit strategy, should the initial relationship not work out, needs to be decided upon before the relationship is established. This should include the manner in which clients, equipment, liabilities and staff will be kept separate in the initial relationship and how they will be divided up should the relationship fail.

Many of the above issues which are initially discussed and agreed upon in principle need to be formalized in legal agreements, some conceptual and others in final detail, before the commencement of the relationship. These agreements may include employment agreements, dissolution agreements which may be included in the employment agreement and shareholder/partnership agreements.

Once all of the agreements are executed, it is time to let the clients know. Each veterinarian should personally tell their larger clients of the new partnership, and it is appropriate to personally introduce the new veterinarians to them. In an ambulatory practice, this may entail spending a few days in the truck with each other. In a hospital-based practice, an open house is the most feasible mode of introduction. All clients should receive an announcement letter, although each practice owner may chose to send a personalized letter to their own clients. Newsletters and announcements should stress the benefits and positive aspects of the merger for both the clients and patients.

Once working together commences, there should be an open-book policy for all partners; at a minimum, separate monthly meetings for partners, veterinary staff and lay staff; and, if necessary, separate meetings for the veterinarians and their previous staff until integration is complete.

With ever increasing costs for technology, employee benefits and equipment, and more attention being paid to quality of life issues, merging of practices may be an answer to some of the challenges we are faced with as practice owners.